Succession plan – work till I die, then leave it to the kids

November 14, 2016

Originally published in the News Star and the Shreveport Times on Sunday, November 13, 2016.

Question: I have a good business with a strong management team. I am beyond retirement age, but due to my capable management team, I am able to come and go as I please, as they run most of the day to day operations. So far things are working out well and I see no reason to retire or try to sell my business. In fact, things run so smoothly I see no reason why I couldn’t pass my business on to my adult children, even though they are not in the business. If they can maintain the strong management team I have put in place, the business should run itself. What am I not thinking of?

Answer: When you are gone, you’ll be gone. Gone gone.

Try a thought experiment: On a wild hair, you and your spouse decide to take a trip today. You go to the airport, pick a direction and just go. You don’t tell anyone where you are going or when you plan to return. Neither of you take a cell phone and you leave no forwarding address.

You find a deserted island with picturesque beaches, endless sunshine and perfect accommodations for two. You could stay there forever. So you give it a try.

For the first two weeks or so not much changes back home, but then two members of the management team have a disagreement about how a personnel matter should be handled. It’s the sort of disagreement that would have naturally found its way to you, and you would have brokered the solution. It would have all happened so naturally as to not even be remembered, but with you absent that brokered resolution never emerges.

So the disagreement festers and becomes a chronic conflict. Soon, words are exchanged, motives are maligned and somebody quits in frustration. That “strong management team” just got one member weaker, not to mention the degrading of the morale around the workplace. Your business’s friendly, supportive work environment just took a step away from mutual trust and towards every-man-for-himself.

And it isn’t just morale. What about money? You may not realize that a dozen different financial decisions get made daily in your business. And each decision is made with you in mind, knowing that you may soon review the wisdom and effectiveness of that decision. Knowing that you will be there to review it brings a certain level of accountability to every money decision made.

Are you beginning to get the picture? Christmas is just around the corner, so watching yet-another-rerun of It’s a Wonderful Life might also help you get it – if your presence means more than you might realize, your absence will also leave a greater void than you might anticipate.

None of the above means you aren’t on the right path. It sounds like you’ve actually cracked the code of truly owning your own business (as opposed to simply owning your own job). It can function without your day to day presence. That’s rare and admirable.

But that’s not to say it can function without you or your long-term presence as a leadership influence. If you want your business to stay healthy longer than you do, you’ve got to implement a succession plan that features competent leadership. Consider some of the following steps.

Family meeting. You’ve got a vague idea that you want to work until you drop, then pass the business on to your family. But do they know that? What would happen if you had a family meeting and told them?

Family plan. They might ask a lot of nosey questions. They might express concerns, excitement, hesitations or interest. But out of such communication might just emerge the rough draft of a plan for a successful family business transition.

Family advice. I would advise anyone on this path to get outside help to facilitate the process. This is too important, and family dynamics are too complex, to wing it. You’ve never done this before, but there are advisors out there who have assisted many family businesses in such transitions. Interview several, then choose one.

Family partnership, power and pay. Eventually you want this transition plan to involve a gradual ramping up of the partnership, the power and the pay of the family members who one day stand to inherit your business. Involving them in strategy (partnership), allowing them to make more and more important decisions (power) and remunerating them for their efforts (pay) will engage them while they are being educated.

It sounds like you could teach a class on how to start and grow and well managed business. You get an “A” for that. But just like everyone else, you’re going to have to take at least one last test, and the topic is “securing a successful succession.”

Let’s make sure you don’t flunk that final exam.

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